Edwards Lifesciences Corp

Previous wording

We are the global leader in patient-focused medical innovations for structural heart disease and critical care monitoring. Driven by a passion to help patients, we partner with the world's leading clinicians and researchers and invest in research and development to transform care for those impacted by structural heart disease or who require hemodynamic monitoring during surgery or in intensive care. We conduct operations worldwide and are managed in the following geographical regions: United States, Europe, Japan, and Rest of World. Our products are categorized into the following groups: Transcatheter Aortic Valve Replacement ("TAVR"), Transcatheter Mitral and Tricuspid Therapies ("TMTT"), Surgical Structural Heart ("Surgical"), and Critical Care. On December 7, 2023, we announced our intention to complete a tax-free spin-off of our Critical Care product group near the end of 2024. The planned separation will enable us to pursue expanded opportunities for TAVR, TMTT, and Surgical patients, as well as new investments in interventional heart failure technologies.

Current wording

We are the global leader in patient-focused medical innovations for structural heart disease. Driven by a passion to help patients, we partner with the world's leading clinicians and researchers and invest in research and development to transform care for those impacted by structural heart disease. We conduct operations worldwide and are managed in the following geographical regions: United States, Europe, Japan, and Rest of World. Our products are categorized into the following groups: Transcatheter Aortic Valve Replacement ("TAVR"), Transcatheter Mitral and Tricuspid Therapies ("TMTT"), and Surgical Structural Heart ("Surgical").

Previous wording

Our net sales for the first three months of 2024 were $1.6 billion, representing an increase of $138.6 million over the first three months of 2023, driven primarily by sales of our TAVR products.

Current wording

Our net sales for the first six months of 2024 were $2.7 billion, representing an increase of $199.6 million compared to the first six months of 2023, driven primarily by sales of our TAVR products.

Previous wording

Our gross profit increased in the three months ended March 31, 2024, driven by our sales growth. Gross profit as a percentage of sales decreased primarily due to foreign currency rate fluctuations. The increase in our diluted earnings per share in the three months ended March 31, 2024 was driven by our increased gross profit, partially offset by an after-tax charge of $36.8 million related to costs associated with the planned spin-off of our Critical Care product group. See Note 4 to the Consolidated Condensed Financial Statements for further information.

Current wording

Our gross profit increased in the six months ended June 30, 2024, driven by our sales growth. Gross profit as a percentage of sales decreased primarily due to foreign currency rate fluctuations. The increase in our diluted earnings per share in the six months ended June 30, 2024 was driven by an after-tax charge of $142.2 million in the six months ended June 30, 2023 related to an intellectual property agreement.

Previous wording

The medical technology industry is highly competitive and continues to evolve. Our success is measured both by the development of innovative products and the value we bring to our stakeholders. We are committed to developing new technologies and providing innovative patient care, and we are committed to defending our intellectual property in support of those developments. Our vision for growth is to treat patients with both valvular and non-valvular structural heart disease, such as heart failure, which is a natural progression of the disease for many patients suffering from aortic stenosis and mitral and tricuspid regurgitation. In the first three months of 2024, we invested 17.8% of our net sales in research and development.

Current wording

The medical technology industry is highly competitive and continues to evolve. Our success is measured both by the development of innovative products and the value we bring to our stakeholders. We are committed to developing new technologies and innovations, and we are committed to defending our intellectual property in support of those developments. Our vision for growth is to treat patients with both valvular and non-valvular structural heart disease, such as heart failure, which is a natural progression of the disease for many patients suffering from aortic stenosis and mitral and tricuspid regurgitation. In the first six months of 2024, we invested 19.4% of our net sales in research and development.

Previous wording

Net sales of TAVR products increased for the three months ended March 31, 2024 driven by higher sales of the Edwards SAPIEN platform in 2024, primarily the Edwards SAPIEN 3 Ultra RESILIA valve in the United States and Japan, and the Edwards SAPIEN 3 Ultra valve in Europe.

Current wording

•higher sales of the Edwards SAPIEN platform in 2024, primarily the Edwards SAPIEN 3 Ultra RESILIA valve in the United States and Japan, and the Edwards SAPIEN 3 Ultra valve in Europe;

Previous wording

•foreign currency exchange rate fluctuations, which decreased net sales outside of the United States by $2.3 million for the three months ended March 31, 2024, primarily due to the weakening of the Japanese yen against the United States dollar.

Current wording

•foreign currency exchange rate fluctuations, which decreased net sales outside of the United States by $10.4 million and $12.5 million for the three and six months ended June 30, 2024, respectively, primarily due to the weakening of the Japanese yen against the United States dollar.

Previous wording

Net sales of TMTT products increased for the three months ended March 31, 2024 primarily due to higher sales of our PASCAL system and our EVOQUE replacement system in the United States and Europe.

Current wording

Net sales of TMTT products increased for the three and six months ended June 30, 2024 primarily due to higher sales of our PASCAL transcatheter edge-to-edge repair ("TEER") system and our initial launch of the EVOQUE tricuspid valve replacement system in the United States and Europe.

Previous wording

Net sales of Surgical products increased for the three months ended March 31, 2024 primarily due to higher sales of the INSPIRIS RESILIA aortic valve in the United States and Europe, the KONECT RESILIA tissue valved conduit in the United States, and the MITRIS RESILIA valve in the United States.

Current wording

Net sales of Surgical products increased for the three and six months ended June 30, 2024 primarily due to higher sales of the INSPIRIS RESILIA aortic valve in the United States and Europe, the MITRIS RESILIA valve in the United States and Europe, and the KONECT RESILIA tissue valved conduit in the United States.

Previous wording

We are continuing to enroll patients in our MOMENTIS clinical study to demonstrate the durability of RESILIA tissue in the mitral position.

Current wording

We have completed enrollment in the United States and Canada of patients in our MOMENTIS clinical study to demonstrate the durability of RESILIA tissue in the mitral position.

Previous wording

The decrease in gross profit as a percentage of net sales for the three months ended March 31, 2024 was driven by a 1.6 percentage point negative impact from foreign currency rate fluctuations, primarily the weakening of the United States dollar against the Euro, partially offset by the weakening of the Japanese yen against the United States dollar.

Current wording

The decrease in gross profit as a percentage of net sales for the three and six months ended June 30, 2024 was driven by a 0.7 percentage point and 1.4 percentage point negative impact, respectively, from foreign currency rate fluctuations, primarily due to the strengthening of the United States dollar against the Japanese yen, partially offset by the weakening of the United States dollar against the Euro.

Previous wording

SG&A expenses increased for the three months ended March 31, 2024 primarily due to higher field-based personnel-related costs in support of our growth strategy initiatives, primarily in the United States and Europe. Foreign currency exchange rate fluctuations decreased expenses by $1.7 million for the three months ended March 31, 2024 primarily due to the weakening of the Japanese yen against the United States dollar.

Current wording

SG&A expenses increased for the three and six months ended June 30, 2024 primarily due to higher field-based personnel-related costs in support of our growth strategy initiatives, primarily in the United States and Europe. Foreign currency exchange rate fluctuations decreased expenses by $4.2 million and $5.7 million for the three and six months ended June 30, 2024, respectively, primarily due to the strengthening of United States dollar against the Japanese yen.

Previous wording

R&D expenses increased for the three months ended March 31, 2024 primarily due to continued investments in our aortic transcatheter valve innovations, including increased clinical trial activity.

Current wording

R&D expenses increased for the three and six months ended June 30, 2024 primarily due to continued investments in our aortic transcatheter valve innovations, including increased clinical trial activity.

Previous wording

We incurred certain litigation expenses related to intellectual property litigation and tax litigation of $8.9 million and $6.5 million during the three months ended March 31, 2024 and 2023, respectively. On April 12, 2023, we entered into an Intellectual Property Agreement (the "Intellectual Property Agreement") with Medtronic, Inc. ("Medtronic") and recorded a $37.0 million charge in March 2023. For more information, see Note 3 to the Consolidated Condensed Financial Statements.

Current wording

We incurred certain litigation expenses related to intellectual property litigation and tax litigation of $8.1 million and $8.9 million during the three months ended June 30, 2024 and 2023, respectively, and $17.0 million and $15.4 million during the six months ended June 30, 2024 and 2023, respectively. Also, on April 12, 2023, we entered into an Intellectual Property Agreement (the "Intellectual Property Agreement") with Medtronic, Inc. ("Medtronic") and recorded a $37.0 million charge in March 2023 and a $139.0 million charge in April 2023. For more information, see Note 3 to the Consolidated Condensed Financial Statements.

Previous wording

Our effective income tax rate was 14.3% and 14.6% for the three months ended March 31, 2024 and 2023, respectively. The decrease in the effective rate between the three months ended March 31, 2024 and 2023 was primarily due toan increased tax benefit from employee share-based compensation. In addition, the effective rates for the three months ended March 31, 2024 and 2023 were lower than the federal statutory rate of 21% primarily due to (1) foreign earnings taxed at lower rates, (2) Federal and California research and development credits, and (3) the tax benefit from employee share-based compensation.

Current wording

Our effective income tax rate attributable to continuing operations was 5.2% and 7.6% for the three months ended June 30, 2024 and 2023, respectively, and 8.8% and 10.6% for the six months ended June 30, 2024 and 2023, respectively. The decrease in the effective rate between the six months ended June 30, 2024 and 2023 was primarily due toan increase in tax benefits from foreign earnings taxed at lower rates and favorable global income tax audit settlements. In addition, the effective rates for the six months ended June 30, 2024 and 2023 were lower than the federal statutory rate of 21% primarily due to (1) foreign earnings taxed at lower rates, (2) Federal and California research and development credits, and (3) the tax benefit from employee share-based compensation.

Previous wording

In the normal course of business, the Internal Revenue Service ("IRS") and other taxing authorities are in different stages of examining various years of our tax filings. During these audits, we may receive proposed audit adjustments that could be material. An adverse outcome in these audits could have a material effect on our results of operations and financial condition. We strive to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While we have accrued for matters we believe are more likely than not to require settlement, the eventual outcome with a tax authority may result in a tax liability that is materially different from that reflected in the consolidated financial statements. Furthermore, we may later decide to challenge any assessments, if made, and may exercise our right to appeal. The uncertain tax positions are reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities, identification of new issues, and issuance of new legislation, regulations, or case law. We believe that adequate amounts of tax and related penalty and interest have been provided for any adjustments that may result from these uncertain tax positions.

Current wording

The Internal Revenue Service ("IRS") and other taxing authorities are in different stages of examining various years of our tax filings. During these audits, we may receive proposed audit adjustments that could be material. An adverse outcome in these audits could have a material effect on our results of operations and financial condition. We strive to resolve open matters with each tax authority at the examination level and could reach agreement with a taxing authority at any time. While we have accrued for matters we believe are more likely than not to require settlement, the eventual outcome with a tax authority may result in a tax liability that is materially different from that reflected in the consolidated financial statements. Furthermore, we may later decide to challenge any assessments, if made, and may exercise our right to appeal. The uncertain tax positions are reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities, identification of new issues, and issuance of new legislation, regulations, or case law. We believe that adequate amounts of tax and related penalty and interest have been provided for any adjustments that may result from these uncertain tax positions.

Previous wording

We executed an Advance Pricing Agreement ("APA") in 2018 between the United States and Switzerland governments for tax years 2009 through 2020 covering various, but not all, transfer pricing matters. The unagreed transfer pricing matters, namely Surgical Structural Heart and Transcatheter Aortic Valve Replacement (collectively "Surgical/TAVR") intercompany royalty transactions, then reverted to IRS Examination for further consideration as part of the respective years' regular tax audits. In addition, we executed other bilateral APAs as follows: during 2017, an APA between the United States and Japan covering tax years 2015 through 2019; and during 2018, APAs between Singapore and Japan and between Switzerland and Japan covering tax years 2015 through 2019. We have filed to renew all three of the APAs with Japan for the years 2020 and forward. An APA between Switzerland and Japan covering tax years 2020 through 2024 was executed in 2021. An APA between the United States and Japan covering tax years 2020 through 2024 was executed in 2023. The execution of some or all these APA renewals depends on many variables outside of our control.

Current wording

We executed an Advance Pricing Agreement ("APA") in 2018 between the United States and Switzerland governments for tax years 2009 through 2020 covering various, but not all, transfer pricing matters. The unagreed transfer pricing matters, namely Surgical Structural Heart and Transcatheter Aortic Valve Replacement (collectively "Surgical/TAVR") intercompany royalty transactions, then reverted to IRS Examination for further consideration as part of the respective years' regular tax audits. In addition, we executed other bilateral APAs as follows: during 2017, an APA between the United States and Japan covering tax years 2015 through 2019; and during 2018, APAs between Singapore and Japan and between Switzerland and Japan covering tax years 2015 through 2019. We have filed to renew all three of the APAs with Japan for the years 2020 and forward. An APA between Switzerland and Japan covering tax years 2020 through 2024 was executed in 2021. An APA between the United States and Japan covering tax years 2020 through 2024 was executed in 2023. The APA renewal between Singapore and Japan covering tax years 2020 through 2026 is pending.

Previous wording

The audits of our United States federal income tax returns through 2014 have been closed. The IRS audit field work for the 2015 through 2017 tax years was completed during the second quarter of 2021, except for certain transfer pricing and related matters. The IRS is currently examining the 2018 through 2020 tax years.

Current wording

The audits of our United States federal income tax returns through 2014 have been closed. The IRS audit field work for the 2015 through 2017 tax years was completed during the second quarter of 2021, except for certain transfer pricing and related matters. The IRS is currently examining the 2018 through 2020 tax years. The audits of our material state, local, and foreign income tax matters have been concluded for years through 2015.

Previous wording

During 2021, we received a Notice of Proposed Adjustment (“NOPA”) from the IRS for the 2015 through 2017 tax years relating to transfer pricing involving Surgical/TAVR intercompany royalty transactions between our United States and Switzerland subsidiaries. The NOPA proposed a substantial increase to our United States taxable income, which could result in additional tax expense for this period of approximately $230 million and represented a departure from a transfer pricing method we had previously agreed upon with the IRS. We have disagreed with the NOPA and pursued an administrative appeal with the IRS Independent Office of Appeals ("Appeals"). The Appeals process culminated in the third quarter of 2023 when we and Appeals concluded that a satisfactory resolution of the matter at the administrative level was not possible.

Current wording

During 2021, we received a Notice of Proposed Adjustment (“NOPA”) from the IRS for the 2015 through 2017 tax years relating to transfer pricing involving Surgical/TAVR intercompany royalty transactions between our United States and Switzerland subsidiaries. The NOPA proposed a substantial increase to our United States taxable income, which could result in additional tax expense for the 2015 through 2017 period of approximately $240 million and represented a departure from a transfer pricing method we had previously agreed upon with the IRS. We have disagreed with the NOPA and pursued an administrative appeal with the IRS Independent Office of Appeals ("Appeals"). The Appeals process culminated in the third quarter of 2023 when we and Appeals concluded that a satisfactory resolution of the matter at the administrative level was not possible.

Previous wording

We plan to vigorously contest the additional tax claimed by the IRS through the judicial process. Final resolution of this

Current wording

We plan to vigorously contest the additional tax claimed by the IRS through the judicial process. Final resolution of this matter is not likely within the next 12 months. We believe the amounts previously accrued related to this uncertain tax position are appropriate for a number of reasons, including the interpretation and application of relevant tax law and accounting standards to our facts and, accordingly, have not accrued any additional amount based on the NOD and other proceedings to date. Nonetheless, the outcome of the judicial process cannot be predicted with certainty, and it is possible that the outcome of that process could have a material impact on our consolidated financial statements. As noted below, similar material tax disputes may arise for the 2018 through 2023 tax years. While no payment of any amount related to the NOPA or NOD has yet been required, we made a partial deposit with the IRS of $75 million in November 2022 to prevent the further accrual of interest on that portion of any additional tax we may ultimately be found to owe. In March 2024, we made an additional deposit with the IRS of $305 million to further mitigate interest on potential tax liabilities and interest thereon while we prepare to contest through the judicial process the IRS's entitlement to any of the additional tax claimed by the IRS.

Previous wording

During the first quarter of 2024, we received a notice of assessment from the Israel Tax Authority (“ITA”) wherein the ITA claimed that we owe approximately $110 million of tax excluding interest and penalties in connection with a claimed 2017 transfer of intellectual property. We maintain that we did not transfer intellectual property outside of Israel and intend to vigorously defend that position through administrative and, if necessary, judicial proceedings. There can be no assurance that this matter will be resolved in our favor and an adverse outcome could have a material effect on our consolidated financial statements.

Current wording

During the first quarter of 2024, we received a notice of assessment from the Israel Tax Authority (“ITA”) wherein the ITA claimed that we owe approximately $110 million of tax excluding interest and penalties in connection with a claimed 2017 transfer of intellectual property. We maintain that we did not transfer intellectual property outside of Israel and intend to vigorously defend that position through administrative proceedings including a formal appeal of the assessment expected to be filed in the third quarter of 2024. If necessary, we will defend that position through judicial proceedings. There can be no assurance that this matter will be resolved in our favor and an adverse outcome could have a material effect on our consolidated financial statements.

Previous wording

As of March 31, 2024, cash and cash equivalents and short-term investments held in the United States and outside of the United States were $851.4 million and $846.2 million, respectively.

Current wording

As of June 30, 2024, cash and cash equivalents and short-term investments held in the United States and outside of the United States were $1.5 billion and $527.9 million, respectively.

Previous wording

In June 2018, we issued $600.0 million of 4.3% fixed-rate unsecured senior notes (the "2018 Notes") due June 15, 2028. We may redeem the 2018 Notes, in whole or in part, at any time and from time to time at specified redemption prices. As of March 31, 2024, we have not elected to redeem any of the 2018 Notes. As of March 31, 2024, the carrying value of the 2018 Notes was $597.2 million.

Current wording

In June 2018, we issued $600.0 million of 4.3% fixed-rate unsecured senior notes (the "2018 Notes") due June 15, 2028. We may redeem the 2018 Notes, in whole or in part, at any time and from time to time at specified redemption prices. As of June 30, 2024, we have not elected to redeem any of the 2018 Notes. As of June 30, 2024, the carrying value of the 2018 Notes was $597.3 million.

Previous wording

From time to time, we repurchase shares of our common stock under share repurchase programs authorized by the Board of Directors. We consider several factors in determining when to execute share repurchases, including, among other things, expected dilution from stock plans, cash capacity, and the market price of our common stock. During the three months ended March 31, 2024, we did not purchase any of our common stock under the Board authorized repurchase program and, as of March 31, 2024, we had remaining authority to purchase $1.0 billion of our common stock under the share repurchase program.

Current wording

From time to time, we repurchase shares of our common stock under share repurchase programs authorized by the Board of Directors. We consider several factors in determining when to execute share repurchases, including, among other things, expected dilution from stock plans, cash capacity, and the market price of our common stock. During the six months ended June 30, 2024, under the Board authorized repurchase program, we repurchased a total of 1.7 million shares at an aggregate cost of $150.0 million. As of June 30, 2024, we had remaining authority to purchase $898.5 million of our common stock under the share repurchase program.

Previous wording

Consolidated Cash Flows - For the three months ended March 31, 2024 and 2023:

Current wording

Consolidated Cash Flows - For the six months ended June 30, 2024 and 2023:

Previous wording

Net cash flows used inoperating activities of $53.5 million for the three months ended March 31, 2024 decreased $367.6 million over the same period last year primarily due to a $305.1 million tax deposit we made in 2024 to mitigate interest on potential tax liabilities we are contesting through the judicial process (see Note 14 to the Consolidated Condensed Financial Statements).

Current wording

Net cash flows provided byoperating activities of $318.0 million for the six months ended June 30, 2024 decreased $29.7 million over the same period last year primarily due to a $305.1 million tax deposit we made in 2024 to mitigate interest on potential tax liabilities we are contesting through the judicial process (see Note 14 to the Consolidated Condensed Financial Statements), partially offset by a $300.0 million payment in the six months ended June 30, 2023 under an intellectual property agreement.

Previous wording

Net cash provided byinvesting activities of $63.1 million for the three months ended March 31, 2024 consisted primarily of net proceeds from investments of $161.4 million, partially offset by capital expenditures of $65.3 million.

Current wording

Net cash provided byinvesting activities of $187.9 million for the six months ended June 30, 2024 consisted primarily of net proceeds from investments of $391.6 million, partially offset by capital expenditures of $150.7 million.

Previous wording

Net cash provided by investing activities of $0.5 million for the three months ended March 31, 2023 consisted primarily of net proceeds from investments of $246.2 million, partially offset by a payment of $141.2 million to acquire a majority interest in another company and capital expenditures of $61.5 million

Current wording

Net cash provided by investing activities of $70.7 million for the six months ended June 30, 2023 consisted primarily of net proceeds from investments of $371.8 million, partially offset by a payment of $141.2 million to acquire a majority interest in another company and capital expenditures of $109.4 million.

Previous wording

Net cash provided byfinancing activities of $61.7 million for the three months ended March 31, 2024 consisted primarily of proceeds from stock plans of $62.1 million.

Current wording

Net cash used infinancing activities of $34.9 million for the six months ended June 30, 2024 consisted primarily of purchases of treasury stock of $158.3 million, partially offset by proceeds from stock plans of $116.4 million.

Previous wording

Net cash used in financing activities of $206.6 million for the three months ended March 31, 2023 consisted primarily of purchases of treasury stock of $249.3 million, partially offset by proceeds from stock plans of $41.9 million.

Current wording

Net cash used in financing activities of $154.5 million for the six months ended June 30, 2023 consisted primarily of purchases of treasury stock of $256.8 million, partially offset by proceeds from stock plans of $102.7 million.